2012 Ontario Budget: Chapter II: Ontario's Economic Outlook and Fiscal Plan
Section B: 2011–12 Interim Fiscal Performance

The 2011 Budget projected a deficit of $16.3 billion in 2011–12. The deficit for 2011–12 is now projected to be $15.3 billion — $1.0 billion lower than the 2011 Budget forecast. This improvement of over 38 per cent from the 2009–10 deficit of $24.7 billion forecast in the fall of 2009 was achieved through the government's commitment to manage growth in spending. The government continues to build on its track record of overachieving on its fiscal targets, just as it has in the last three years.

Program spending and total spending are both projected to be lower than forecast in the 2011 Budget. In addition, program spending is expected to grow by only 2.5 per cent over the 2010–11 results — the second-lowest annual growth in program spending in 10 years.

TABLE 2.2. 2011–12 In-Year Fiscal Performance
($ Millions)
  Budget Plan1 Interim In-Year Change
Revenue 109,298 109,277 (20)
Expense      
   Programs 114,623 114,463 (161)
   Interest on Debt 10,290 10,097 (193)
Total Expense 124,913 124,560 (353)
Reserve 700 (700)
Surplus/(Deficit) (16,316) (15,283) 1,033

1Revenue and expense have been restated to reflect a fiscally neutral accounting change related to the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review. Starting in this Budget, revenue and expense have been restated to reflect a fiscally neutral reclassification of a number of tax expenditures as described in Section F of this chapter. For purposes of comparison, 2011 Budget amounts were restated on the same basis.

Revenue in 2011–12 is projected to be $20 million below the Budget Plan. Lower taxation revenue as a result of slower economic growth and lower federal transfers was largely offset by higher one-time non-tax revenues.   

Program expense for 2011–12 is projected to be $161 million below the Budget Plan, reflecting the government's commitment to manage growth in spending. With interest on debt expense coming in below forecast, total expense for 2011–12 is projected to decrease by $353 million compared with the 2011 Budget forecast. This would mark the third consecutive year that total expense has come in lower than the Budget Plan.

In the 2011 Ontario Economic Outlook and Fiscal Review, the government reduced the reserve by $500 million to counter the expected impact of slower economic growth on the Province's fiscal performance. The 2011–12 interim outlook uses the remaining $200 million reserve to improve the Province's fiscal performance and reduce the 2011–12 deficit.

The interim results for 2011–12 are based on information available as of early March 2012. Given the preliminary nature of these estimates, the interim forecast is subject to change as actual Provincial revenue and expense are finalized in the 2011–12 Public Accounts this summer.

In–Year Revenue Performance

Total revenue in 2011–12 is estimated to be $109,277 million. This is $20 million below the amount projected in the 2011 Budget. This reflects offsetting variances among revenue sources.

  • Taxation revenues are $638 million lower, largely due to slower economic growth.
  • Government of Canada transfers are $372 million lower, due in part to a federal estimation error that led to a downward revision to Ontario's Equalization entitlement. In addition, lower transfers for infrastructure and consolidated agencies were largely offset by lower spending.
  • Income from Government Business Enterprises is $87 million lower, with lower net incomes from the Liquor Control Board of Ontario, Ontario Power Generation Inc. and Hydro One Inc. only partially offset by higher net income from the Ontario Lottery and Gaming Corporation.
  • The variances noted above are offset by a largely one-time positive variance of $1,077 million in Other Non-Tax Revenue related to Chrysler's repayment of an Ontario loan, and higher-than-expected recoveries of prior-year expenditures from government ministries.
TABLE 2.3 Summary of Revenue Changes Since 2011 Budget1
($ Millions)
    Interim 2011–12
Taxation Revenue    
   Personal Income Tax (1393)  
   Sales Tax 751  
   Ontario Health Premium (183)  
   Land Transfer Tax 163  
   Corporations Tax (156)  
   All Other Taxes 180  
    (638)
Government of Canada    
   Equalization Payments (150)  
   All Other Government of Canada (222)  
    (372)
Income from Government Business Enterprises    
   Ontario Power Generation Inc./Hydro One Inc. (107)  
   Ontario Lottery and Gaming Corporation 65  
   Liquor Control Board of Ontario (45)  
    (87)
Other Non-Tax Revenue    
   Chrysler Loan Repayment 468  
   All Other Non-Tax Revenue 609  
    1,077
Total Revenue Changes Since 2011 Budget   (20)

1 Revenue and expense have been restated to reflect a fiscally neutral accounting change related to the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review. Starting in this Budget, revenue and expense have been restated to reflect a fiscally neutral reclassification of a number of tax expenditures as described in Section F of this chapter. For purposes of comparison, 2011 Budget amounts were restated on the same basis.

Revenue Changes

Highlights of key 2011–12 revenue changes from the 2011 Budget forecast are as follows:

  • Personal Income Tax (PIT) revenues are estimated to be $1,393 million lower, mainly due to weaker revenues from processing 2010 tax returns. Since the 2011 Budget, processing of 2010 tax returns has lowered the base upon which growth is applied in forecasting PIT revenues for 2011–12. Lower revenues than estimated at the time of the 2010–11 Public Accounts also resulted in a one-time decrease of $566 million in 2011–12 as variances from past Public Accounts are reflected in the current year. Weaker-than-expected wages and salaries growth in 2011 also contributed to weaker 2011–12 results.
  • Sales Tax revenues are projected to be $751 million higher, largely reflecting higher federal estimates of Ontario's Harmonized Sales Tax entitlements for 2010 and 2011 that were received in December 2011.
  • Ontario Health Premium revenues are $183 million below the 2011 Budget Plan, primarily reflecting weaker revenues from processing 2010 tax returns and weaker personal income growth.
  • Land Transfer Tax (LTT) revenues are estimated to be $163 million above the 2011 Budget Plan due to a stronger-than-expected housing market.
  • Corporations Tax (CT) revenues are estimated to be $156 million lower mainly due to higher refunds related to past years and weaker growth in corporate profits, which are partially offset by higher revenues resulting from 2010 tax return processing.
  • All Other Taxes revenues combined are estimated to be $180 million higher on a net basis, largely reflecting higher revenues from Mining Tax and the Preferred Share Dividend Tax.
  • Government of Canada transfers under the Equalization program are $150 million lower, due to the federal government calculation error as previously reported in the First Quarter Ontario Finances.
  • All Other Government of Canada transfers are $222 million lower, mainly due to lower transfers for infrastructure spending and consolidated agencies, which are largely offset by lower spending.
  • The combined net income of Ontario Power Generation Inc. (OPG) and Hydro One Inc. is estimated to be $107 million below the 2011 Budget forecast, largely due to the Ontario Energy Board's (OEB) March 2011 decision for OPG's rate application for 2011 and 2012, lower market prices for OPG's unregulated hydro and lower volumes, and the impact of unfavourable capital markets on OPG's nuclear funds.
  • Net income from the Ontario Lottery and Gaming Corporation is projected to be $65 million higher, largely due to the agency working to decrease operating costs across all lines of business and higher revenues.
  • Net income from the Liquor Control Board of Ontario is $45 million lower than projected, largely due to a one-time accounting adjustment.
  • All Other Non-Tax Revenue combined is $1,077 million higher, largely reflecting:
    • a $468 million gain from Chrysler's repayment of an Ontario loan as previously announced in the First Quarter Ontario Finances; and
    • higher recoveries of prior-year expenditures from government ministries.

In-Year Expense Performance

Total expense in 2011–12 is currently projected to be $353 million lower than the 2011 Budget forecast as a result of strong expenditure management and lower interest on debt expense.

Program expense in 2011–12 is projected to be $161 million lower compared with the 2011 Budget forecast. The decrease is mainly due to lower-than-projected expense in the health, postsecondary and training, and children's and social services sectors.

Growth in program spending between 2010–11 and 2011–12 is projected to be only 2.5 per cent — the second-lowest rate of growth in the last 10 years. This outcome was supported by the government's expenditure management strategy to fund any new initiatives through offsetting savings from other areas of spending.

Interest on debt expense is $193 million lower than projected in the 2011 Budget, primarily reflecting the impact of lower-than-forecast interest rates and the lower deficits for 2010–11 and 2011–12.

TABLE 2.4 Summary of Expense Changes Since 2011 Budget 1
($ Millions)
  Interim
2011-12
Program Expense Changes2  
   Health Sector (261.3)
   Education Sector3 126.3
   Postsecondary and Training Sector (52.8)
   Children's and Social Services Sector (135.5)
   Justice Sector 68.1
   Other Programs 94.6
Total Program Expense Changes (160.6)
Interest on Debt (192.9)
Total Expense Changes Since 2011 Budget (353.5)

1Revenue and expense have been restated to reflect a fiscally neutral accounting change related to the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review. Starting in this Budget, revenue and expense have been restated to reflect a fiscally neutral reclassification of a number of tax expenditures as described in Section F of this chapter. For purposes of comparison, 2011 Budget amounts were restated on the same basis.
2Excludes fiscally neutral transfers between ministries.
3Excludes Teachers' Pension Plan.

Expense Changes

Highlights of key expense changes since the 2011 Budget include the following:

  • Health sector expense is projected to decrease by $261 million, primarily due to savings in the Ontario Drug Program, as well as lower-than-expected utilization and underspending in various ministry programs such as clinical education.
  • Education sector expense is projected to increase by $126 million, primarily due to a one-time adjustment related to last year's capital grants. That adjustment is fully offset by an increase in revenue recovery from the school board sector. Excluding this adjustment, education sector expense would have decreased by $121 million, primarily due to lower-than-expected school board expense.
  • Postsecondary and training sector spending is projected to decrease by $53 million, mainly due to underspending in Employment Ontario programs resulting from lower client uptake, and consolidated savings primarily from a realignment of capital funding to match construction expenditures at colleges and universities.  
  • Children's and social services sector expense is projected to decrease by $136 million, primarily due to lower-than-projected social assistance expense.
  • Justice sector expense is expected to increase by $68 million primarily as a result of legal settlements under the Proceedings Against the Crown Act and additional funding for operational pressures.
  • Other programs expense is projected to increase by $95 million, mainly due to the impact of providing additional resources for emergency forest firefighting services. The contingency funds have been maintained at $250 million in recognition of expense changes that could materialize as the 2011–12 Public Accounts are finalized.
  • Interest on debt expense for 2011–12 is projected to be $193 million lower than forecast in the 2011 Budget primarily due to the impact of lower-than-forecast interest rates and the lower deficits for 2010–11 and 2011–12.